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Here are simplified financial statements for Watervan Corporation: INCOME STATEMENT (Figures in $ millions) Net sales...

Here are simplified financial statements for Watervan Corporation:

INCOME STATEMENT
(Figures in $ millions)
Net sales $

895.00

Cost of goods sold

755.00

Depreciation

45.00

Earnings before interest and taxes (EBIT) $

95.00

Interest expense

26.00

Income before tax $

69.00

Taxes

14.49

Net income $

54.51

BALANCE SHEET
(Figures in $ millions)
End of Year Start of Year
Assets
Current assets $

383

$

340

Long-term assets

286

236

Total assets $

669

$

576

Liabilities and shareholders’ equity
Current liabilities $

208

$

171

Long-term debt

122

135

Shareholders’ equity

339

270

Total liabilities and shareholders’ equity $

669

$

576

The company’s cost of capital is 8.5%.

a. Calculate Watervan’s economic value added (EVA). (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)

b. What is the company’s return on capital? (Use start-of-year rather than average capital.) (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

c. What is its return on equity? (Use start-of-year rather than average equity.) (Enter your answer as a percent rounded to 2 decimal places.)

d. Is the company creating value for its shareholders?

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